Analysts expect a hawkish Fed pause and resilient US growth to support the dollar ahead of key GDP and inflation data.
The Federal Reserve is expected to hold its benchmark rate at 3.50%-3.75% for a fifth consecutive meeting, reinforcing a hawkish stance that may bolster the US Dollar. Fed funds futures reflect a 38% chance of a 25bps hike this week, with nearly 50bps of tightening priced in by year-end.
Markets will focus on the FOMC vote split and inflation commentary, with a potential 10-2 dissent favoring a 25bps increase. Q2 GDP is forecast at 2.1% SAAR, matching Q1, driven by consumer spending and AI-related investment, while June PCE and the Employment Cost Index will provide further direction.
A unanimous June hold contrasts with expectations of a divided vote this week, as officials like Lorie Logan argue for higher rates to counter inflation risks.